Executive Summary / Key Takeaways

• Differentiated Technology & U.S. Manufacturing Leadership: First Solar stands as the sole U.S.-headquartered, vertically integrated PV manufacturer of scale, leveraging its proprietary Cadmium Telluride (CdTe) thin-film technology for superior real-world energy yield and a lower environmental footprint compared to conventional crystalline silicon (c-Si) modules.
• Strategic Capacity Expansion & Backlog Resilience: The company is on track to expand its global manufacturing capacity to over 25 GW by 2026, supported by a robust contracted backlog of 66.3 GW, providing significant revenue visibility and a strong foundation for future growth.
• Navigating Tariff Headwinds: Recent U.S. reciprocal tariffs, particularly on imports from Southeast Asia, have significantly impacted First Solar's near-term outlook, leading to a revised 2025 EPS guidance range of $12.50-$17.50 and strategic adjustments like pivoting India production to the domestic market and considering idling international facilities.
• Long-Term Demand Tailwinds: Despite near-term policy uncertainty, the long-term outlook for U.S. solar demand remains strong, driven by electrification, AI/data center growth, and reshoring initiatives, positioning First Solar to capitalize on its domestic manufacturing advantage and Section 45X tax credits.
• Commitment to Innovation & IP Enforcement: First Solar continues to invest heavily in R&D, advancing its CuRe technology and perovskite research, while aggressively enforcing its intellectual property rights, including recent litigation against JinkoSolar (JKS), to protect its technological moat in a competitive landscape.

A Unique Position in the Global Solar Landscape

First Solar, Inc. has carved out a distinctive niche in the global solar energy sector, evolving over 25 years to become a leader in advanced thin-film photovoltaic (PV) technology. Unlike the vast majority of its competitors, First Solar operates as the only U.S.-headquartered, vertically integrated PV manufacturer of scale, a strategic pivot initiated years ago when the company divested its systems business to sharpen its focus on module manufacturing. This foundational decision, coupled with a deliberate strategy of establishing manufacturing footprints in key regions like the U.S., India, Malaysia, and Vietnam, has shaped its current market position and strategic responses to an increasingly complex global energy transition.

At the core of First Solar's differentiation is its proprietary Cadmium Telluride (CdTe) thin-film technology. This is not merely an alternative to the dominant crystalline silicon (c-Si) modules; it offers tangible, quantifiable benefits. CdTe modules use approximately 2% to 3% of the semiconductor material required by conventional c-Si modules, translating into a significantly lower environmental footprint and often a more efficient manufacturing process. In real-world operating conditions, particularly in hot and humid climates, First Solar's modules exhibit superior energy yield due to a better temperature coefficient and enhanced bifaciality. For instance, initial data from the company's CuRe technology deployment indicates an enhanced energy profile from superior temperature response and improved bifaciality, with laboratory accelerated life testing confirming industry-leading annual degradation rates. This technological edge contributes directly to a lower Levelized Cost of Electricity (LCOE) for utility-scale projects, making First Solar a compelling choice for large-scale deployments.

The company's commitment to innovation extends beyond its core CdTe. First Solar is actively pursuing its technology roadmap through significant R&D initiatives. The CuRe program, which saw a limited commercial production run in Q1 2025, aims to further enhance module performance, with plans to permanently convert its Ohio lead line to CuRe in Q1 2026, followed by phased replication across its fleet. This is expected to unlock additional revenue through contractual adjusters tied to technology improvements. Furthermore, First Solar is investing in next-generation technologies, with its new perovskite development line in Ohio expected to be fully operational by Q2 2025. This research focuses on developing thin-film perovskite crystals and tandem devices, with management asserting "there is no tandem without thin film," underscoring their belief in the long-term disruptive potential of their core expertise. These R&D efforts are designed to extend First Solar's competitive moat, enabling higher average selling prices (ASPs) and lower manufacturing costs, thereby bolstering margins and securing long-term market leadership.

Industry Trends and Competitive Dynamics

The solar industry is currently shaped by powerful, often conflicting, forces. On one hand, the global push for electrification, particularly in the U.S., is creating unprecedented demand for power generation. Data centers, fueled by the artificial intelligence boom, are projected to see their energy consumption grow by 300% over the next 10 years, contributing over 60% of the total U.S. power consumption growth through the end of the decade. This surge, coupled with reshoring of manufacturing and utility-scale capital expenditure increases (from $174 billion in 2024 to $211 billion by 2027), creates a robust, policy-agnostic demand for solar. First Solar is uniquely positioned to capitalize on this, with 92% of the U.S. interconnection queue comprising renewables and solar being the fastest form of new generation. The company's strong track record with hyperscalers and its ability to deliver projects quickly are significant advantages. Moreover, states with high utility-scale solar deployment, such as Texas and Florida, have demonstrated consumer electricity bills 8% to 24% lower than the national average, reinforcing solar's economic appeal.

On the other hand, the industry grapples with severe oversupply, primarily driven by Chinese manufacturers. These players, often benefiting from direct or indirect state support, have expanded capacity far beyond global demand, leading to pricing volatility and, in some markets like the European Union and India, prices near or below manufacturing costs. This "race to the bottom" behavior has resulted in a projected U.S. oversupply of approximately 40 GW by year-end 2024. First Solar, while not immune, is better insulated due to its differentiated technology and strategic focus on the U.S. market.

In this competitive landscape, First Solar's primary publicly traded competitors include crystalline silicon module manufacturers like Canadian Solar (CSIQ), Jinko Solar, and SunPower (SPWR).

• Jinko Solar, a c-Si giant, commands a significant global market share (around 19%) driven by sheer manufacturing scale and aggressive pricing. While JKS boasts higher peak efficiency (up to 25% vs. FSLR's ~18-22% for CdTe) and higher revenue growth (25-30% YoY), its profitability (net margin 4-6%) is significantly lower than First Solar's (29.72% TTM net margin). JKS's strategy relies on volume and cost leadership, often at the expense of margins, and is highly exposed to U.S.-China trade tensions.
• Canadian Solar, another c-Si leader, also focuses on high-volume production and project development. CSIQ's revenue growth (18-20% YoY) outpaces FSLR's, but its net margins (5-7%) are also considerably lower. CSIQ faces similar vulnerabilities to trade tariffs and supply chain disruptions.
• SunPower, primarily focused on residential and commercial c-Si, operates in a different segment than First Solar's utility-scale focus. SPWR's profitability (net margin 2-4%) is even lower, reflecting the intense competition and different market dynamics in its niche.

First Solar's competitive advantage is multi-faceted. Its CdTe technology offers superior performance in real-world conditions, translating to 10-15% better energy output in specific scenarios compared to c-Si, which supports its ability to command higher ASPs (e.g., $0.305/watt for recent bookings). This technological edge, combined with its U.S. manufacturing base, allows First Solar to benefit from the Inflation Reduction Act's (IRA) Section 45X tax credits, which provide a significant financial boost (e.g., $1.65 billion - $1.7 billion in 45X credits expected in 2025). This domestic advantage is crucial, as new c-Si competitors entering the U.S. market would likely face higher costs due to imported raw materials like patterned glass and aluminum.

Furthermore, First Solar is aggressively enforcing its intellectual property (IP) rights. The company's TOPCon patent portfolio, acquired through TetraSun in 2013, has become a key strategic asset. Following a victory upholding its Chinese TOPCon patents, First Solar initiated legal action against JinkoSolar in February 2025 for alleged infringement of its U.S. TOPCon patents. Simultaneously, it entered a licensing agreement with Talon PV, a U.S. cell manufacturer, demonstrating a dual strategy of enforcement and commercialization. This IP strategy creates uncertainty for c-Si manufacturers, potentially driving them to seek licenses or pivot technologies, thereby reinforcing First Solar's competitive differentiation and potentially increasing its market share.

Financial Performance and Strategic Responses

First Solar's financial performance in Q1 2025 reflected both its underlying strength and the emerging challenges from the evolving trade landscape. Net sales increased 6.4% year-over-year to $844.6 million, driven by an 8% increase in module volumes sold. However, gross profit as a percentage of net sales decreased to 40.8% from 43.6% in Q1 2024. This margin compression was primarily due to higher sales freight, demurrage, and detention charges ($52 million), increased costs from a higher mix of U.S.-produced modules ($39.1 million), and elevated module storage costs ($22.3 million). These headwinds were partially offset by a significant benefit from the Section 45X advanced manufacturing production credit, which reduced cost of sales by $106.8 million.

Operating expenses saw increases in SG&A due to higher credit losses and legal costs, and R&D due to investments in new facilities and headcount. Despite these, the effective tax rate improved to 3.5% from 7.4% year-over-year, largely due to the 45X credits and income from lower-tax foreign jurisdictions. Net income for Q1 2025 was $209.5 million, translating to diluted EPS of $1.95, which came in below the low end of guidance due to a lower-than-forecasted mix of U.S. versus international products sold.

Liquidity saw a notable decrease, with cash, cash equivalents, and marketable securities falling by $0.9 billion from year-end 2024 to $0.9 billion at the end of Q1 2025.

This was attributed to lower cash receipts from module sales, increased payments to suppliers, and capital expenditures for U.S. facilities ($206 million in Q1 2025, primarily for the Louisiana plant). The company also faced working capital headwinds from a $350 million increase in overdue accounts receivable, including $70 million from 2024 contract terminations and a $100 million deferred payment. Despite this, First Solar maintains a strong balance sheet and expects to finance its announced capital programs without external financing, leveraging its operating cash flows and advance payments from customers. The $1 billion Revolving Credit Facility remains untapped, providing significant financial flexibility.

Operationally, First Solar continues its aggressive capacity expansion. The Alabama facility is ramping up, and the Louisiana facility's construction is complete, with equipment installation underway for commercial operation in H2 2025. These expansions are critical to reaching the target of over 14 GW of U.S. nameplate capacity by 2026 and a global capacity exceeding 25 GW.

Outlook and Risks

First Solar's updated 2025 guidance reflects the profound impact of recent U.S. trade policy shifts. The revised full-year 2025 EPS guidance is now $12.50-$17.50, down from the previous $17.00-$20.00. Net sales guidance has also been adjusted to $4.5 billion-$5.5 billion, from $5.3 billion-$5.8 billion. This revision is a direct consequence of the new tariff regime, particularly the potential reinstatement of country-specific reciprocal tariffs (e.g., 26% for India, 24% for Malaysia, 46% for Vietnam) after the initial 90-day pause.

Management explicitly stated that these high tariffs make shipping products from international facilities into the U.S. "uneconomical." As a result, the guidance assumes a significant reduction in international volume sold into the U.S. market. The lower end of the EPS range factors in the assumption of partial or full idling of Malaysia and Vietnam factories for U.S.-bound sales through year-end. To mitigate this, First Solar is strategically pivoting its India facility away from U.S. exports, reallocating approximately half of its India production to the domestic Indian market, which has growing demand (e.g., PM custom segment aiming for 30 GW by March 2026). This shift, while necessary, increases the company's reliance on the Indian domestic market's book-and-build capacity.

The company's U.S. manufactured volume sold forecast (9.5 GW - 9.8 GW) remains unchanged, underscoring the strategic importance of its domestic footprint. However, the tariff impacts are not limited to international sales; they also increase capital expenditure costs for new U.S. factories and U.S. factory production costs, and lead to increased underutilization expenses from idling international plants. The overall impact on EPS is estimated at $2.50 per diluted share, comprising $1 direct tariff cost, $1 indirect impact on volume/ASPs, and $0.50 from underutilization/logistics.

Key risks to this outlook include:

• Policy Uncertainty: Beyond tariffs, the ongoing budget reconciliation process and potential changes to the IRA's clean energy tax credits (like Section 45X) or the implementation of Foreign Entity of Concern (FEOC) provisions could significantly alter the competitive landscape and First Solar's profitability.
• Trade Policy Volatility: The uncertainty surrounding the duration and specific rates of tariffs, particularly after the 90-day pause, creates a challenging environment for long-term planning and contracting.
• Manufacturing Issues & Warranty: While the Series 7 manufacturing issues (glass cleaning, engineering performance margin calculation) have been identified and remediated, the company still holds 0.7 GW of potentially impacted modules in inventory, and ongoing customer discussions and potential litigation related to these issues could impact future results.
• Supply Chain Risks: China's tightening export controls on tellurium and other critical minerals, while currently managed through diversification, pose a long-term risk.
• Litigation: Ongoing legal proceedings, including the JinkoSolar IP suit, the subcontractor injury lawsuit, and SEC investigations, could incur significant costs and divert management attention.

Conclusion

First Solar stands at a pivotal juncture, uniquely positioned to capitalize on the burgeoning demand for clean energy in the U.S. while confronting significant geopolitical and trade-related headwinds. Its core investment thesis is rooted in its differentiated CdTe thin-film technology, which offers superior real-world performance and a lower environmental footprint, and its strategic commitment to vertically integrated U.S. manufacturing. This domestic advantage, amplified by the IRA's Section 45X tax credits, provides a robust foundation for profitability and resilience in an otherwise commoditized global market.

While recent U.S. reciprocal tariffs have necessitated a downward revision of 2025 guidance and strategic adjustments to international operations, First Solar's proactive measures—such as pivoting its India production and evaluating the idling of other international facilities—demonstrate its agility and commitment to protecting margins. The company's aggressive pursuit of innovation through CuRe and perovskite research, coupled with its assertive IP enforcement, further strengthens its competitive moat against a backdrop of Chinese oversupply and c-Si competition. Investors should recognize First Solar's role as a critical enabler of U.S. energy independence and a beneficiary of long-term demand drivers like AI-driven data centers. Despite near-term volatility stemming from policy uncertainty, First Solar's unique profile, technological leadership, and strategic execution position it as a compelling long-term investment in the evolving global energy landscape.